A large Russian pipe manufacturer will gain momentum due to the oil boom

OMK Anatoly Sedykh to build a steel plant and new pipe shops for 110 billion rubles.
08.10.2018
Vedomosti
Origin source
The representative of the company spoke about the plans of OMK to Vedomosti. At its largest production site - Vyksa Metallurgical Plant - a new steel industry will be built, as well as new facilities for the production of seamless pipes and oilfield service mix pipe. Existing steelmaking can be replenished with electric steel-smelting capacities of 1.5 million tons of steel per year.

The project is still under discussion, the final concept will be developed in the first quarter of 2019, follows from OMK materials. How much it can cost, the company representative did not answer. Maxim Khudalov, director of the corporate ratings group at ACRA, says that the cost of building an electric steel-smelting complex with a capacity of 1.5 million tons may be about 30 billion rubles.

The creation of our own steel production is necessary to ensure raw material safety in the implementation of new investment projects for the production of pipes, it follows from OMK information. The company itself produces billet for the production of pipes (rolled, wide sheet). At the same time, part of steel semi-finished products OMK buys from third-party manufacturers. As the representative of the company explained, the task of OMK is to organize its own production of special purpose steels.

In 2017, Russia produced 71.3 million tons of steel. The largest producer - NLMK Vladimir Lisin - produced 17.076 million tons (24%). On an all-Russian scale, an additional 1.5 million tons is not so much at first glance: a little more than 2%. However, taking into account the fact that there is no shortage in the Russian market or in the steel market, new capacities can bring a revival to the sector, says BCS Global Markets analyst Kirill Chuiko: “It’s always interesting, especially for consumers.

Own steel is a significant advantage for pipe makers: prices for purchased billets are rising after the prices of the world market, but prices for pipes are not, as there is a surplus of pipe capacities in the domestic market, says Khudalov. “Thus, cost control is a reasonable way for pipe manufacturers in the current market reality,” he adds.

Also, until 2022, OMK will commission two new pipe rolling shops. The first is for the production of oil and gas pipes, oilfield pipe mix pipe (OCTG) worth 40 billion rubles. and with a capacity of 450,000 tons. His company announced a year ago, in the fall of 2017. The second project is the construction of the production of seamless pipes: oil and gas pipelines, linear and threaded. “The new production will make it possible to produce pipes from high-alloyed steel with the addition of chromium for extremely complex conditions,” a OMK representative said. The project will be implemented until 2022, investments in it will also be about 40 billion rubles. The capacity of the project is 500,000 tons per year. Thus, the OMK investment program until 2022 will amount to about 110 billion rubles.

OMK relies specifically on the seamless pipe segment, the head of the asset development and investment department of OMK, Dmitry Chernyshev, passed it through a representative: “The share of horizontal drilling is increasing, the fields and production conditions for them are becoming more difficult.” OMK's new investment projects are aimed at growing niches where the welded pipe cannot be supplied, Chernyshev added. OMK plans to supply seamless pipes to "all major consumers and gas companies." There is a demand for new seamless products from OMK Chernyshev: the demand in the segment has been growing for the last few years, and new capacities for the production of seamless pipes for horizontal drilling and production in difficult conditions have not been introduced.

Pipe manufacturers had a difficult period when the capacity created was redundant during the post-crisis decline in demand for all types of products. In addition, pipe manufacturers for oilfield service companies faced a sharp decline in demand due to falling oil prices: the global oil industry lost $ 700 billion in investment by the end of 2015, according to UK-Sputnik CEO Alexander Losev. Now the situation has changed. Oil is worth more than $ 80 a barrel. “The construction industry has intensified in Russia, there are infrastructure projects,” says Losev. “Investments in oil and gas projects are growing and recovering to the level of 2014 by about mid-2020, which means an increase in demand for large-diameter pipes and seamless pipes.” In his opinion, the demand for pipes will grow over 2–3 years. Considering the fact that OMK began to invest in new facilities in 2017, the company has good chances to make money on reviving the oil and gas industry, concludes Losev.

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